Without a doubt, 2020 was a difficult year for the stock market. In March 2020, the Dow sank by over 2,000 points, its worst index since the financial crisis of 2008. The S&P 500 shrunk by over 7%. The oil prices plummeted. And even though the Coronavirus Crash ended in April following the 65% surge of the S&P 500, many investors are still unsure whether the stock market will continue to grow at such a fast rate.
How will the stock market recovery change the landscape of charitable giving? Here at Overflow, we studied the stock-market forecast for 2021 to investigate whether stock donations can become the hottest trend in the fundraising world and what will this mean for charities and nonprofits.
According to Wall Street experts, 2021 will be a great year for the stock market. Many investors are hoping that the vaccine rollout coupled with generous stimulus packages will help stabilize the world economy, encourage the opening of borders, and accelerate economic recovery.
The Goldman Sachs experts believe that the S&P 500 index will rise by over 15% due to increased corporate profits and a low-interest rate, highly favorable for the US corporations. The experts at Morgan Stanley and Wells Fargo are less optimistic in their claims: they believe that the S&P will only rise by around 6% — however, this is still a great upward trend for the stock market considering the tumultuous year caused by the COVID-19 pandemic.
The overall earnings of the S&P 500 companies are expected to grow by about 23% in 2021 compared with 2020. The oil prices are estimated to increase as well: the countries all around the world will begin to rebound from COVID-19 leading to the oil demand to rise. 2021 is also likely to be a big year for cryptocurrency, as some traders and analysts believe that Bitcoin could potentially hit a high of $318,000 by December 2021.
What is the number one downside of appreciated stock shares and securities? The capital gains taxes that can cut your investment income by as much as 37%.
If some of these predictions are true, at the end of this year, many investors will have to rebalance their stock portfolios to offset their capital gains.
There are two main ways to do this. To realize their losses, investors can sell their assets at a loss — however, if the said stock shares increase in value later on, investors will be missing out on potential growth stocks by selling them in order to decrease their capital gains.
This is why the best way to offset one's capital gains is to donate stock to a charity of their choosing. When investors donate appreciated stock to charity, they will avoid paying the capital gains tax and receive a tax deduction for the fair market value of the shares.
Donating stock to charity is becoming the new normal of the philanthropy world.
Since donating stock is one of the few ways to avoid capital gains tax, 2021 will bring even more stock donations to charities and nonprofits, as more investors will be looking to offset their capital gains.
Around 80% of all U.S. donors own appreciated stock or securities, which makes stock donations a lucrative opportunity for charities to maximize their fundraising potential. However, even though more than half of Americans now own stock, over 1 million charities and nonprofits in the US still can't access non-cash donations, such as appreciated stock.
Book a meeting with us to maximize your year-end giving appeal today!
*The information provided on this website does not constitute professional tax advice; instead, all information and materials available on this site are for general informational purposes only.